Banks must unfreeze accounts while securing disputed cyber-fraud amounts in fixed deposits pending magistrate orders.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution seeking defreezing of his bank account bearing No. 6049313859 maintained with Kotak Mahindra Bank, Indore MG Road Branch.

The account had been frozen pursuant to information or directions received from cyber-crime authorities in connection with an alleged cyber fraud. The Court found that the petitioner’s case was covered by its earlier decision in Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

In the present case, the disputed amount identified by the investigating agencies was Rs. 5,200, while the remainder of the account balance was not shown to require continued freezing.

1. Whether the petitioner’s bank account, frozen pursuant to communications from cyber-crime authorities, should be unfrozen subject to safeguarding the disputed amount of Rs. 5,200.

2. Whether the disputed amount should be retained in a fixed deposit pending appropriate orders from the competent Judicial Magistrate under the applicable provisions of the BNSS.

3. Whether the undisputed balance in the petitioner’s account could continue to remain frozen.

The Court exercised its writ jurisdiction under Article 226 of the Constitution to regulate the continued freezing of the petitioner’s bank account.

It applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, that where an account is frozen on the basis of cyber-crime investigations, the disputed amount may be segregated and kept in a fixed deposit, subject to orders of the competent Judicial Magistrate, while the remaining balance should ordinarily be released.

The investigating agency was expected to proceed in accordance with the applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, or any other governing law, within the stipulated period.

Since the factual circumstances were materially identical to those considered in Malcolm Murayis, the Court applied that precedent mutatis mutandis.

It balanced the interests of the investigation and the petitioner by directing that only the allegedly tainted amount of Rs. 5,200 be placed in a fixed deposit. That amount could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months, thereby preserving the investigating agency’s claim while preventing an indefinite restraint on the petitioner’s funds.

Because no justification was shown for freezing the remaining balance, the Court directed that the rest of the amount be released.

The fixed deposit could be liquidated only after an order of the competent Judicial Magistrate within three months; failing such an order, the amount could also be withdrawn by the petitioner under intimation to the police agency.

The petitioner’s bank account was otherwise directed to be unfrozen, and any remaining undisputed balance was ordered to be released.